Can a corporation own 100% of another corporation?
With effect from taxable years beginning after December 31, 1996, S corporations may now own 80 percent or more of a C corporation or 100 percent of a qualified subchapter S subsidiary (QSSS). A parent company has a controlling interest in another company if it has majority ownership and controls operations.
Wholly Owned Subsidiaries
If the parent company owns 100% of another company, then the company is a wholly owned subsidiary. A wholly owned subsidiary is a company whose common stock is completely (100%) owned by a parent company.
Can an S corp own 100% of an LLC?
Since the LLC operates as a pass-through entity for tax purposes, the profits and losses of the LLC will pass through to the S corp if the S corp is the single owner in the LLC. For example, if you own a landscaping business that is structured as an S corp and want to expand into the plant nursery business, you can form a second S corporation for the subsidiary business with your original S Corp as the sole shareholder.
State laws vary, but in most an LLC may have any number of members who can be individuals, S Corps, C Corps, other LLCs, and even foreign entities. While an S Corp’s profits must be divided proportionally to each shareholder’s ownership interest in the company, an LLC’s profits may be distributed disproportionately if its operating agreement declares so. In theory, an S Corporation could own 100 LLCs if it doesn’t have any other shareholders. The original business can own the new business as an S Corp if it owns all of the shares.
One LLC can fund another LLC either via an equity investment or a loan. The shareholders must be individuals, trusts, tax-exempt organizations, or estates and the individuals must also be citizens of the United States. These individuals can not be LLCs, Corporations, or any other business entities. An S corporation can own an LLC by following the same process that a natural person would in order to file and register an LLC in a state of their choosing. To do so, the S corporation must engage a local registered agent and provide the necessary supporting documents, including information on the member of the LLC being formed. In this case, the member of the LLC being formed would be the S corp.
The owners of a limited liability company (LLC) are called members. Each member is an owner of the company. An LLC is formed in a state by filing Articles of Organization or similar document in some states. If the LLC has just one owner, it will be taxed as a sole proprietorship. As a member of an LLC, either a single member or one of the multiple members in the business, you are a business owner, not an employee of your company. If that’s the case, then a corporation which classifies as an S Corp can absolutely own an LLC. It does not make a difference if the corporation owns 100% of the LLC or only 1% of the LLC, it is a valid owner. So, if you are one of 3.65 MILLION S Corp firms, you absolutely can own LLCs.